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Wholesale Distributed Generation

The wholesale electricity market differs from the retail market in that electricity is produced in order to be sold to utilities or other purchasers for distribution to industrial, commercial, and residential customers. The wholesale distribution grid has typically consisted of large, centralized facilities located far from load centers that must transmit the produced electricity long distances.

Distributed generation (DG), on the other hand, is the use of smaller power generators that produce electricity closer to load demand. Wholesale distributed generation (wholesale DG) are DG systems that are connected directly to the electric distribution network and sell the electricity on the wholesale market.

Meeting Local Electricity Demand

Solar wholesale DG is considered to be solar electric generation between 1 megawatt (MW) and 20 MW. The market for wholesale DG has grown quickly over the last few years as solar developers expand beyond retail electricity installed on-site for end users and large, central station solar plants, both concentrating solar power and photovoltaic, often located in the Southwest.

This model is advantageous for solar developers because projects are generally large enough to achieve economies of scale for solar electric deployment, but their moderate size allows them to locate close to the load. Solar wholesale DG projects have minimal environmental impacts and associated permitting requirements and can often be interconnected with little or no upgrades to electric distribution or transmission systems. Consequently, under the proper conditions, solar wholesale DG can be sited and constructed quickly and economically in vast areas of the United States, in many cases in close proximity to load centers.

Related Resources

A Growing Wholesale DG Market

PJM, a regional transmission organization (RTO) that coordinates the movement of wholesale electricity over an area that includes more than 51 million people, stated that two-thirds of current active projects 20 MW or less, highlighting the strong growth potential of solar wholesale DG. A similar phenomenon is occurring in California where the Reverse Auction Mechanism (RAM) directs investor-owned utilities to procure 1,000 MW of distributed renewable generation of 20 MW or less. However, barriers to interconnection, such as the 15 percent rule, may hinder the growth of solar wholesale DG if they are not modified.